Amazon Earnings Preview: AWS May Join Azure in Reporting Slower Growth

Some analysts say AWS' growth will also slow throughout 2023 and they project Q4 will show a 22% growth rate for the cloud computing market leader.

Bloomberg News

February 2, 2023

3 Min Read
Image of AWS logo on a screen.

(Bloomberg) -- Inc., having predicted its slowest-ever holiday-season growth, now seems poised to turn in a better performance than expected — thanks in part to resilient US consumers.

The question is whether a decent Christmas season will be enough to offset slowing sales growth at the company’s cloud services division, which for years has generated most of Amazon’s profit. 

The Seattle-based company is scheduled to report quarterly results on Thursday, and analysts estimate the e-commerce giant earned 17 cents a share, down from 29 cents a share a year earlier. 

Amazon spooked Wall Street in October after forecasting the weakest fourth-quarter sales growth in its history. Weeks later, the company announced thousands of layoffs among its corporate ranks, suggesting to some investors that executives were bracing for a possible recession. 

Since then, inflation has cooled, the US economy has shown enduring strength, and online shopping has continued to grow, if more slowly than during the pandemic-era boom. 

“People are assuming the worst,” said Sucharita Kodali, who follows e-commerce for Forrester Research. “You have to step back and recognize that retail spend is at a high.” 

Investors have in turn grown more bullish on the company, pushing the shares up about 22% this year — though that partly reflects the fact that the stock was so badly battered last year that it now represents a buying opportunity. 

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Bloomberg Second Measure, which tracks credit- and debit-card transactions, estimates that Amazon’s US retail sales during the last three months of 2022 rose 9.3% from the previous year. Amazon forecast that revenue, which includes international units, business purchases and cloud-computing sales that the Bloomberg Second Measure data don’t capture, would rise between 2% and 8%. The US accounts for about two-thirds of the company’s revenue. 

Healthier sales at Amazon wouldn’t necessarily translate into ample profit. The company’s operating expenses have climbed at a faster pace than sales for more than a year. 

Amazon is working to slim down after rapid pandemic-era growth. The company has slowed the opening of new warehouses, abandoned some facilities and recently sold a Bay Area office complex that it was expected to convert to logistics facility. Last month, Amazon started a new round of layoffs that will eventually total 18,000 employees. 

Amazon hasn’t disclosed the financial impact of the job cuts, whether in severance costs or future savings on salaries. Analysts at Oppenheimer & Co. estimate that taking those salaries off the books will save Amazon $2.1 billion this year and $3.3 billion in 2024.

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Global Market Share for Public Cloud Services


The health of AWS, the market leader in selling rented computing power and data storage, is a question mark because some big corporate customers are reassessing their technology spending. Just as consumers did more of their shopping online during the Covid-19 outbreak, businesses ramped up purchases of on-demand computing power from AWS and others, an effort to enable remote work and satisfy increasing demand for digital products like video streaming. That growth has slowed, with some companies now coming to AWS to ask for help cutting their bills.    

Microsoft Corp., Amazon’s nearest rival in cloud services, alarmed investors last week when it forecast slower growth for its own cloud operations.  

Analysts expect AWS’s sales to grow by 22% in the fourth quarter, to $21.7 billion, and slow through 2023, holding closer to 20%. 

“Is this temporary, a couple quarters of belt tightening, or is this structural decline?” said Stefan Slowinski, an analyst at BNP Paribas Exane. Slowinski, who has an “underperform” rating on Amazon shares, is the only analyst tracked by Bloomberg with the equivalent of a sell rating on the stock. 

AWS tends to account for more operating income than the rest of the company combined. But analysts and investors will also parse Amazon’s guidance for signs of progress in raising retail margins, said UBS analyst Lloyd Walmsley. “Investors want to get comfort that savings won’t get frittered away in other areas,” he said. 

Overall, analysts expect Amazon to post sales of $145.8 billion for the three months ended Dec. 31, up 6% from a year earlier. Net income is expected to be $1.98 billion, down 60%.  

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